Greece's public debt is forecast to reach 125% of its national income this year. Photograph: Petros Giannakouris/AP

The European parliament has urged EU authorities to investigate the role of Goldman Sachs and other investment banks in contracts that helped inflate Greece's public debt.

Over the past few years, Goldman Sachs and other banks lent money to Greece through currency contracts that allowed the government to raise millions but that didn't count as debt. The transactions led to hefty fees for the investment banks.

"It appears that Goldman Sachs have colluded with past Greek governments to reduce the appearance of Greece's debt for short-term gain, while in reality making it worse than ever," said Arlene McCarthy, vice-president of the European parliament's economic and monetary affairs committee. "These deals have increased costs for Greek taxpayers and left a mess behind for Greece's citizens and the eurozone."

McCarthy urged the EU's economic and monetary affairs commissioner, Olli Rehn, to explain the banks' role and to specify what action he plans to take "to stop banks assisting European governments in hiding public debt".

The deals, which started around 2001, only had a small effect on the country's budget deficit and its future liabilities, a former top official who was involved in the matter told Reuters.

"These instruments were not invented by Greece, nor did investment banks discover them just for Greece," said Christophoros Sardelis, who was chief of Greece's debt management agency when the contracts were conducted with Goldman Sachs.Such contracts were also used by other European countries until Eurostat, the EU's statistic agency, stopped accepting them later in the decade. Eurostat has also asked Athens to clarify the contracts.

Goldman Sachs declined to comment.

Greece's credibility in the financial markets has plunged on concerns about the reliability of its economic data. The country is now under pressure to cut its budget deficit to 3% of the size of its economy by 2013 – down from 12.2%. Greece's public debt is forecast to reach 125% of gross domestic product this year.

Concerns about Greece's ability to pay its debts have spread to other Southern European countries, such as Portugal, Italy and Spain. Defying market turbulence, the latter plans to issue 15-year bonds this month, a challenge to an investment community that has punished high deficit countries since the beginning of the Greek crisis two weeks ago.

"I don't think this (Spain's) auction should be any issue, especially after EU leaders said last week that for the foreseeable future, default is not an option," said Cyril Beuzit, head of interest rate strategy at BNP Paribas.

The premium that the Spanish, Italian and Portuguese governments pay over the rock-solid German bunds to raise funds has stabilised over the past few days. In Spain's case, this spread trades now at about 80 basis points, down from the 100bps reached last week, but still ahead of the 50bps paid before the crisis broke.

The real test to the market will come when Greece tries to sell 10-year bonds in March, Beuzit said.